New York Times Explores CFPB’s Next Moves, Including Debt Collection

After several large settlements with consumer lending organizations, mostly over mortgage and credit card practices, what’s next for the Consumer Financial Protection Bureau?

The New York Times explored this very question in a piece detailing what the Bureau may focus on in the near future.

Debt collection will be front and center on the CFPB’s to-do list once the comment period expires on its Advance Notice of Proposed Rulemaking. If anything, 2014 could turn out to be the most important year for debt collection industry regulation since the passage of the FDCPA in 1977.

While noting this, the Times article focuses on one area of debt collection rulemaking most favored by consumer advocates: the flow of information validating debts. As one consumer attorney noted in the article, “We want more information throughout the process, but we also want everyone in the process to be responsible to pass all of that information to the next buyer or collector of debt. There are no rules on the books like that right now.”

Beyond the direct impact on the ARM industry stemming from the ANPR, there are several other areas of focus highlighted by the Times that could touch debt collectors.

Overdraft Fees – If regulators codify requirements for banks’ use of overdraft fees in checking accounts, an entire sector of the ARM industry could be impacted: demand deposit account (DDA) collection. But that particular area has already been under the microscope on the state level, with several recent high-profile enforcement actions from state AGs.

Arbitration – While mostly focused on the original credit contract, any arbitration rule changes could affect the way many ARM companies, especially those using the legal collection channel, approach accounts. And the debt collection industry is already familiar with arbitration issues. Several years ago, a scandal erupted when regulators discovered that National Arbitration Forum (NAF), one of the largest consumer debt arbitration providers, had corporate ties to a collection law firm and agency. The result was the suspension of consumer debt operations by NAF and AAA, and a round of settlements with regulators, including from Bank of America.

[Editor’s Note: for more on how the CFPB’s rulemaking for debt collection will impact the ARM industry, attend our insideCompliance session Assessing the Impact of CFPB Rules on Debt Collectors on February 18.]